Money is tight and anyone looking to make a bit of money in 2009 should be seriously taking a long, hard look at what is the best place to invest. With last year being such a bloodbath for anyone with a bit of money to spare, perhaps it is time to look at more unorthodox ways of investing money.
After all, below is what would have happened to your money if you had invested it traditionally last year:
There is no such thing as a stable bank savings account, as savers with the Icelandic banks – particularly Icesave – found to their cost at the end of this year. The UK, along with many other governments worldwide, have promised to honour people’s savings if a bank goes bust – but only up to £50,000.
The best rate currently available is the 4% at ING Direct, but only 2% of that is guaranteed and, with interest rates likely to fall, most experts are predicting that 2.5% is likely to be the mean for savers this year.
Return: 2.5% = £102,500
Tax?: 10% on interest in UK = £102,250
Net profit: £2,250
Ooh, you don’t want to do that. The average LOSSES forwas 18.3% last year. That means that if you had given a hedge fund your £100,000 to look after you would only get back £81,700, and that’s only if the hedge fund allows you to take it out. Most still standing are offering investors who ask for redemptions shares in the hedge fund, meaning your earnings will be directly tied to the performance of the hedge fund, no matter how badly it does. And that isn’t good news for 2009. Experts say that are likely to suffer worse losses in 2009 as people rush to and gold in the wake of a deepening recession.
Then there’s funds like Bernard Madoff’s ‘Ponzi scheme’. Investors with Madoff are likely to get nothing but a high-profile court case for their money.
Return: -18.3% on average = £81,700
Tax?: None likely. Most hedge funds are offshore
Net loss: £19,300
For years investing on the stock markets has been seen as a surefire way to get rich. But in the current downturn that theory has been blown out of the window. In the UK last year, the FTSE 100 – the main index for shares on the London Stock Exchange – fell a whopping 31.3% in 2008. If you had looked at shares abroad, you’re money would not have been much better served and, in some cases, you would have come off much worse. In Shanghai (China) stocks fell 65%, in the US stocks lost 34% of their value, Germany they were down 40.4%, Hong Kong 48.3%, Singapore 49.2%, Tokyo 42.1%, the list goes on and on.
While many are expecting a bounce in stock prices in 2009, we are currently in a bear market, which means that shares are not stable: if they do go up, they are just as likely to come down again. Experts predict that the best strategy for investing in stocks is to invest in short-term bursts as good news filters through and have a direct line to your stockbroker. It’s going to be a bumpy ride in 2009!
Return: -31.3% in UK = £68,700
Tax?: No Capital Gain Tax to be paid on losses
Net loss: £31,300
Long known as one of the safest forms of investment, Bonds are rarely defaulted on because governments don’t go bust – at least they never used to. Iceland, Ireland and Portugal are desperately trying not to buck that trend.
They usually offer a very small return because of their safety, but they are seen as they stand-out place to put your money next year. The best rate on offer is 4.65%, but beware, if stocks rebound that is likely to fall.
Return: 4.65% = £104,650
Tax?: First £9,600 exempt under Capital Gains Tax
Net gain: £4,650
Whenever things look bad in the global economy, gold always looks gold. It’s an historical thing. The clue to gold’s popularity is engrained in the bank notes in your pocket. Take out a £5, £10, £20 or £50 not and on the top appear the words: Promise to pay the bearer the sum of…”. Money, after all, is only a promissory note – a promise to pay the equivalent amount. Equivalent what? Well, gold, of course. Take a fiver into the Bank of England and hand over the note and they are honour bound to change it for the equivalent in gold. It’s often forget in good times when credit (trust) is not an issue, but in these tough times people want to see their wealth, and that means gold becomes flavour of the month.
Last year gold was unsurprisingly the best performing commodity in the world markets. At one point it reached over $1,000 in spot price, but has since fallen back to around the $850. The return in 2008 depended on where you were in the world, because the gold price can be a little complex: they are tied to currencies. In dollars, which is what gold is traded in, gold rose 4% on the year. Most experts, as the crisis deepens are expecting gold to push up to and above the $1,000 mark, which will represents a 15% return.
But be warned, because gold is tied to currencies and currency prices directly affect exports from the home country of said currency, governments often try to manipulate the gold price to keep their currency honest. This means that the gold market is not a level playing field, and hasn’t been for years.
Return: 4% = 104,000
Tax?: First £9,600 exempt under Capital Gains Tax
Net gain: £4,000
The reason why we’re in this mess in the first place, the property bubble burst with such magnitude last year that the mess infiltrated every corner of the global economy. Looking at property experts predictions at the start of 2008 was a lesson in itself: they predicted anything up to a 10% gain in UK property prices over the year. Even the most pessimistic were way off. One experts was vilified for suggesting that prices will fall 5%. Even that was way off the mark as property prices tumbled on average 15% for the year. The same experts predict that there will be a similar fall in prices next year before a recovery in 2010. All in all, the boat has well and truly sailed on making money on property speculating – don’t even think about investing here.
Return: -15% = £85,000
Tax?: Tax? First £9,600 exempt under Capital Gains Tax
Net loss: £15,000
A QUESTION OF TRUST
Of course, things are likely to improve in time. Despite the doom and gloom merchants, the global economy is being predicted to improve by 2010. But the turmoil of the last year and the next few years will linger longer in the memory. People will be scrutinising who has their money, what expertise (if any) they have to grow their money, what track record they have to grow wealth – and what they plan to do with it when they have it.
As soon as people saw their money, they started looking for alternative investments. But the alternative investments they looked at were not alternative at all, they were strictly traditional ways of pushing for a return. We’re talking wine, art, stamp collecting, hobbies etc..
Problem is: these are influenced by the same supply and demand factors as all the investments above. Namely, if nobody wants them because they don’t have much money spare, then their value will go down, ergo their price will go down. It turned out (quelle surprise) that their value has been going up for years because rich people had made a lot of money investing in hedge funds and shares and property and were flush for money. Now they’re not so flush with money, they no longer want, or can afford, a wine cellar or expensive frippery for their walls.
This is why I believe that a new investment avenue is needed, although one that fits in to precious models.
Ask yourself the question: what is the difference between investing in shares and putting money on the horses or a football match? Anyone City trader will tell you that the only obvious difference is that shares do go down, but you will always get some return for your investment, while a bet, if it loses has no return at all.
Of course, this is true if you put all your money on one horse or the outcome of one match. Likewise, only a stupid investor in shares will put all their money into one company (unless they know something they shouldn’t).
What if I was to tell you that it is more than possible, it is probable to make healthy returns on a regular investment on football matches.
It is done in the same way that someone would invest in shares: with expert knowledge of the market (stock, betting); close study of form (of companies, of teams); and a good system.
The only fundamental difference between the two, if both are done properly is that the outside forces involved in a football match (crowd, players, referee etc..) are far less volatile than the pressure on a share price (shares in other companies, decisions by governments, natural disasters, bad management, hostile bids, even short selling).
People have trusted City traders for years: why do football tipsters get such a bad rap?
It’s all done with mirrors and, to some extent, via reputations. Fact is, throughout history traders have got governments out of a lot of holes. Plus, a lot of very rich people have an interest in getting as many people interested in shares. The more people they can get to invest in their vehicles, the more they make on their money. Which leads me to believe that sport is actually a lot safer place to speculate. The outcome is more random, but there are less variables and, with the right knowledge someone could make money.
In fact, a lot of people do. As I’ve said before on footbet.net 95% of the people who walk into a betting shop walk out losers. That has always meant that 5% of people are winners – of those a portion are regular and professional gamblers.
These people know what they are doing, they have a strategy and they stick with it, and they play the long game: never chasing winnings, never betting emotionally.
To the professional football gambler, betting is THE alternative investment.
Footbet.net season breakdown (6 months up to 16/01/09)
Amount invested: £94,500
Tax?: No tax, the bookie pays it for you
Net gain: £4,878.50
Percentage gain: 5.16%